Oil prices jumped 4% because Trump rejected an Iranian proposal to reopen the Strait of Hormuz. Traders who spent the last six months learning to draw head and shoulders patterns on their phones now need to figure out where the Strait of Hormuz is. Good f*cking luck with that.
The Strait of Hormuz is a waterway that carries about 21 million barrels of oil per day. Iran offered to stop threatening it. Trump said no. Oil went up. Retail traders saw green candles and bought crude futures without knowing which body of water we're talking about. Half of them think Hormuz is a seasoning.
Here's what happened from a technical perspective: none of this matters. Oil was at a support level. It bounced. The news gave CNBC something to say while the chart did what the chart was going to do anyway. You could have replaced this headline with "Trump Rejects Iranian Proposal To Send Him A Nice Fruit Basket" and the price action would look identical.
Some guy in Michigan just bought his first oil ETF because his brother-in-law texted him "dude Middle East." He doesn't know what a strait is. He doesn't know where Iran is relative to anything. He knows Trump said no to something and a line went up. He will hold this position until it's worth sixty percent of what he paid for it, then sell it and tell everyone at Thanksgiving that the markets are rigged.
The funniest part is not that retail traders are buying a geopolitical headline. The funniest part is they think they're early. Brother, Goldman Sachs traded this headline forty seconds before it was a headline. You're not early. You're late to a party that ended before you found your keys.
Photo by on Unsplash
Leave a Comment